1. Investments: an introduction

2. Investments Goods and services Payment Sources Goal: Increment Revenues Types: Environmental Services Goods (timber, NTFP) Tax reduction Sources: Society, State, consumers, NGO etc. SFM by forest owner/ Manager (Communities, State, NGOs, private enterprise) Financing (distribution) mechanism State Bank Fund Project/ Programme (Bundling) Payment (revenue) mechanism Market Negotiated deals State Fund (Bundling) Plantations/Natural Forests/ National Parks /Agroforestry Enabling environment for financing strategy Guided by national forest programme (nfp) principles Financing Sources Goal: Reduce Costs Liquidity provision Risk Mitigation Types: Subsidies Tax reduction Credits Investments Funds Sources: State, Donors, Banks, institutional investors, pension funds, stock market Source of concept: Savenije & van Dijk, persComm. 2007 National Forest Financing Strategy: a multi stakeholder process

3. ‘Investments’: characteristics zEncourage willingness of others to invest in forests yReduce cost of investment yRemove structural barriers zSometimes direct investment yFocus on purchase, establishment or maintenance of forest zOften government or international agencies involved

4. Investment financing: What it is not zFinancing not directly related to volume of output of products and services, zNo buyer and seller of the forest product or service zNo market for products and services, but: zYes, sometimes a market for the capital flows

5. Investments versus goods/services financing zSeems ‘traditional’ versus ‘innovative’ zInnovative not better because it’s new zSelection of proper channel depends on local circumstances zAlso depends on politics: role of the government

6. Investments Sources & Mechanisms zGovernment funding zDonations, bilateral multilateral aid, multilateral agencies and agreements zEnvironmental funds zTaxation measures zFavorable credits zSubsidies zCapital market

7. Government funding zSupport to forest owners by forest service yAdvice ySeedlings zProvision of funds to buy forests zGovernment provides funds to manage the state forests

8. Bilateral and multilateral aid (1) zODA: ya major source for financing SFM yBut only 10% of world wide spending on forest management (which is not necessarily SFM) yFocus on poverty alleviation, MDGs yCatalyzing role, leverage function ySometimes debt-for-nature swap as an instrument

9. Bilateral and multilateral aid (2) zMultilateral agencies and agreements: ySources of funding with their specific mechanisms yExamples: GEF; ITTA and ITTO; UNCCD; NFP facility; PROFOR at Worldbank yMostly project based yFavored beneficiaries: government and civil society

10. National Environmental Funds zIn more than 30 countries, since 1990ies z‘Investment’ but not ‘traditional’ zExamples: yNational trust funds; Foundations; Endowment funds; Conservation trust fund (independent from government)

11. Taxation measures zCosts of forest establishment & management deductible from tax yLand rent yPersonal income tax zFiscal transfers: ypolluter pays to sustainable producer zEcological value-added-tax (VAT): yPart of a tax is transferred to a fund for forests or water management

12. Favorable credits zLow interest, long period to pay credit back, period of grace zNot always exclusively directed at forest sector: yAgricultural sector yEnterprises

13. Subsidies zFor forest establishment, zMaintenance zProtection zMany examples e.g. in Costa Rica

14. Capital market (1) zA company yacquires immature forests and plants new forest, ymakes contracts for management and maintenance and even long term contracts for harvesting and selling the timber. y based on these contracts securitized financial instrument will be issued backed by the net cash flows generated from the harvest and commercialization of the forest products. zAdvantages: yFund investors will receive dividends and a return of capital. yimportant environmental impact ySmall and medium landowners significantly increase their current income and can monetize and optimize the value of their current landholdings.

15. Capital market (2) zA pension fund example: ySwiss pension fund buys a forest concession in Brazil yHires expertise to manage the concession yEstablishes a saw-mill yLooks for international marketing expertise